Providing health benefits nears $15,000 per employee

With the cost to provide health care benefits expected to approach $15,000 per employee next year, large U.S. employers are increasingly playing an activist role in changing the health care delivery system and reexamining existing models, according to recent research from the National Business Group on Health (NBGH). The survey also found a majority of employers believe virtual care and technology will play a major role in how health care is delivered in the future and that new entrants will be necessary to disrupt the market in a positive way.

The Large Employers’ 2019 Health Care Strategy and Plan Design Survey found employers project the total cost of providing medical and pharmacy benefits will rise 5 percent for the sixth consecutive year in 2019. Including premiums and out-of-pocket costs for employees and dependents, the total cost of health care is estimated to be $14,099 per employee this year, and projected to rise to an average of $14,800 in 2019. Employers will cover roughly 70 percent of those costs; employees will bear about 30 percent. NBGH found. Employers cited high cost claims, specialty pharmacy, and specific diseases as key drivers of cost increases.

“Health care cost increases continue to outpace workers’ earnings and increases in inflation, making this trend unaffordable and unsustainable over the long term,” said Brian Marcotte, President and CEO of the NBGH. “No longer able to rely on traditional cost sharing techniques to manage costs, a growing number of employers are taking an activist role in shaking up how care is delivered and paid for.”

Nearly half of respondents (49 percent) are either driving changes in the delivery system directly or through their health plan, leveraging digital solutions, or both. For example, 35 percent are implementing alternative payment and delivery models such as accountable care organizations (ACOs) and high performance networks (HPNs) either directly or through their health plan. Direct contracting with health systems and providers is expanding, from 3 percent in 2018 to 11 percent in 2019. Direct contracting between employers and Centers of Excellence (COEs) is also rising sharply, from 12 percent this year to 18 percent next year. Cancer, cardiovascular and fertility COEs are experiencing the greatest growth.

The survey found that 52 percent of employers believe virtual care will play a significant role in how health care is delivered in the future while 43 percent believe Artificial Intelligence will play a major role. In fact, half of employers (51 percent) identified implementing more virtual care solutions as their top health care initiative in 2019. Virtual care has branched out well beyond physician consultations to include digital coaching, condition management, remote monitoring, physical therapy and cognitive behavioral therapy, all of which show the greatest potential for growth over the next several years.

“The growth in virtual solutions largely reflects employer frustration with the pace of change in how health care is delivered. Interestingly, seven in ten employers believe new market entrants from outside the health care industry are needed to disrupt health care in a positive way. These disruptors include innovators from Silicon Valley and elsewhere, and employer coalitions,” said Marcotte.

Prescription drugs. The survey also found nearly all employers believe the pharmaceutical supply chain needs to change—14 percent said it needs to be more transparent, 35 percent stated rebates need to be reduced while half stated the pharmaceutical supply chain is inefficient and too complex and needs to be overhauled and simplified. Additionally, three in four employers do not believe drug manufacturer rebates are an effective tool for helping to drive down pharmaceutical costs and over 90 percent would welcome an alternative to the rebate-driven approach to managing drug costs.

“Contracting within the pharmaceutical supply chain has not kept pace with today’s plan design reality,” said Marcotte. “The rebate-driven supply chain model is antiquated given the growth in high deductible plans and is ripe for change.”

According to the survey, more than half of the survey respondents are concerned that rebates do not benefit consumers at the point-of-sale. A growing number of companies (27 percent) are adopting recently developed capability by pharmacy benefit managers to pull rebates forward at the point of sale to benefit consumers. Another 31 percent are considering implementing point of sale rebates in the next few years.